Calabar Head Office operates a dependent branch in Uyo, invoicing all goods at cost price. For the year ended 31 December 2025, the following records were extracted from the branch accounting books:
| Transaction Details | Amount (₦) |
|---|---|
| Stock at branch (1 January 2025) | 45,000 |
| Branch debtors (1 January 2025) | 28,000 |
| Goods sent to branch | 320,000 |
| Goods returned by branch to head office | 12,000 |
| Cash received from branch debtors | 215,000 |
| Cash sales at branch | 140,000 |
| Credit sales at branch | 230,000 |
| Returns inwards from branch debtors | 5,000 |
| Bad debts written off at branch | 3,000 |
| Discount allowed to branch debtors | 4,000 |
| Branch operating expenses paid by head office | 38,000 |
| Stock at branch (31 December 2025) | 58,000 |
Based on the information provided, what is the net profit earned by the Uyo branch for the year ended 31 December 2025?
Answer: 25000 ₦
Answer
The net profit earned by the Uyo branch for the year ended 31 December 2025 is ₦25,000.
The correct net profit is computed by preparing the Branch Account in the Head Office ledger. The Branch Account is credited with cash remitted (₦355,000), closing stock (₦58,000), and closing debtors (₦31,000), totaling ₦444,000. It is debited with opening stock (₦45,000), opening debtors (₦28,000), net goods sent to branch (₦308,000), and expenses paid by head office (₦38,000), totaling ₦419,000. The surplus of credits over debits represents the net profit of ₦25,000.
Step-by-Step Solution
Key Concept
Accounting for Dependent Branches at Cost Price